# SmartRent, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [SmartRent, Inc.](/companies/smrt.md) (CIK 1837014)
- Form: 10-Q
- Filed: 2025-05-07
- Accepted by EDGAR: May 7, 2025, 12:12 ET
- Period: 2025-03-31
- Accession: 0000950170-25-065034
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1837014/000095017025065034/smrt-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1837014/000095017025065034/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $41.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $27.8m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $8.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$41.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $108.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$40.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.21 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.21 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 192,419,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$12.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $2.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $1.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-03-31 | $125.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $227.9m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $366.1m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $75.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $115.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $250.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 69,123 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included herein and the consolidated financial statements and notes thereto for the year ended December 31, 2024 contained in our Annual Report on Form 10-K filed with the SEC.*

*This discussion may contain forward-looking statements based upon our current expectations that involve risks and uncertainties. Please refer to the section titled “Cautionary Note Regarding Forward-Looking Statements".*

### Overview

We are an enterprise real estate technology company that provides a comprehensive management platform designed for property owners, managers and residents. Our suite of products and services, which includes cloud-based SaaS solutions many of which are enabled by smart building hardware, provide seamless visibility and control over real estate assets. Our platform can lower operating costs, increase revenues, mitigate operational friction and protect assets for owners and operators, while providing a differentiated, elevated living experience for residents.

Through a Hub Device, we enable the integration of our platform with third-party smart devices, our own hardware devices and other technology interfaces. We use an open-architecture, brand-agnostic approach that allows owners, operators, and residents to manage their smart home systems through a single connected interface. Our Smart Community solutions include software and devices that power (i) smart apartments and homes, (ii) access control for buildings, common areas, and rental units, (iii) community and resident WiFi, and other solutions such as asset protection and monitoring, parking management and self-guided tours. Our Smart Operations solutions include work order management, the automation of leasing and resident call handling, audit management, and the automation of the inspection process. We also have a professional services team that provides customers with training, installation, and support services.

SmartRent is a category leader in the enterprise smart home solutions industry. As of March 31, 2025, we had 827,611 Units Deployed (as defined below) and over 650 customers, including many of the largest multifamily residential owners in the United States. As of that date, we believe our customers owned an aggregate of approximately 7.6 million rental units; this represents approximately 15% of the United States market for institutionally owned multifamily rental units and single-family rental homes. In addition to multifamily residential owners, our customers include some of the leading single-family rental homeowners, homebuilders, and iBuyers in the United States.

### Our Business Model

We generate revenue primarily from sales of smart home systems that enable property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents. Our revenue is generated from: (1) the direct sale to our customers of hosted services from monthly subscription fees collected from customers to provide access to Hosted Services including access controls, asset monitoring, WiFi, and related services; (2) the sale and delivery of smart home devices, which generally consist of a Hub Device, door-locks, thermostats, sensors, and light switches; and (3) installation and implementation of smart home devices that enable our Hosted Services. Subscription arrangements have contractual terms ranging from one month to ten years and the weighted average length of our recurring revenue contracts is 4.3 years.

### Key Factors Affecting Our Performance

We believe that our success is dependent on many factors, including those further discussed below. Our operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including our ability to grow our customer base in a cost-effective manner, expand our hardware and hosted service offerings to generate increased revenue per Unit Deployed (as defined below), and provide high quality hardware products and hosted service applications to maximize revenue and improve the leverage of our business model. While these areas represent opportunities for us, they also represent challenges and risks that we must successfully address in order to operate our business.

### Active Supply Chain Management

We continue to experience improvements in the challenges related to the global supply chain. In prior periods, the increased demand for electronics as a result of the COVID-19 pandemic, U.S. trade relations with China and certain other factors in recent periods led to a global shortage of semiconductors, including Z‑wave chips, which are a central component of our Hub Devices. Due to this shortage in prior periods, we experienced Hub Device production delays, which affected our ability to meet scheduled installations and facilitate customer upgrades to our higher-margin Hub Devices. We also experienced shortages and shipment delays related to components for Access Control and made-to-order specialty locks.

The incremental improvements in the global supply chain are evidenced by our reduction of backlogged Units Deployed for Access Control and made-to-order locks.

### Investing in Research and Development

Our performance is significantly dependent on the investments we make in research and development, including our ability to attract and retain highly skilled research and development personnel. We must continually develop and introduce innovative new software services and hardware products, and integrate with third-party products and services, mobile applications and other new offerings.

### New Products, Features and Functionality

We are evolving our business into a more diverse platform with new products, features and functionality that enhance the value of our smart home operating system. We have introduced a number of SaaS product enhancements and features, including Answer Automation and Work Management solutions, that streamline property management operations. We have also introduced Community WiFi, which provides communities with a private, device-dedicated WiFi network to power Hub Devices and other in-home smart devices, and Smart Package Room, which is a smart package management solution that transforms package visibility, reduces labor demands, optimizes storage space and enhances resident satisfaction. Our Smart Operations Solutions enhance our overall platform offering and customer value proposition by providing a comprehensive one-stop platform that broadens our support of property operations, enhancing the experience for residents, property owners and managers. We offer an open-API architecture that enables a myriad of third-party partner integrations, resulting in a multi-functional platform that enhances property management workflow efficiencies, empowers teams to get more done, elevates resident interactions, and improves resident living experiences. In the future, we intend to continue to release new products and solutions and enhance our existing products and solutions, and we expect that our operating results will be impacted by these releases.

### Category Adoption and Market Growth

Our future growth depends in part on the continued consumer adoption of software and hardware products which improve the resident experience and the growth of this market. We need to deliver solutions that enhance the resident experience and deliver value to our customers, rental property owners and operators, as well as homebuilders and developers, by providing products and solutions designed to enhance visibility and control over assets while providing additional revenue opportunities. During the year ended December 31, 2024, we experienced headwinds to adoption as certain customers deferred capital expenditures, driven by broader macroeconomic conditions, which resulted in a decrease in Units Shipped and New Units Deployed. In addition, changes in our executive leadership and the structure of our sales organization have impacted sales and overall volumes.

### Recent Developments

In January 2025, we announced the appointment of Michael Shane Paladin as President and Chief Executive Officer and member of the Board.

In April 2025, we announced the departure of Mr. Paladin, effective April 9, 2025. As part of the transition, Mr. Paladin resigned as a member of the board of directors, effective April 9, 2025. We have appointed John Dorman, our Board Chair, as our Interim CEO, effective as of April 9, 2025. Alison Dean, an independent member of the Board, has been appointed lead independent director of the Board. The Board has initiated a search to identify the next Chief Executive Officer of SmartRent and is working with a leading executive search firm to assist in the process of identifying and evaluating candidates.

On May 2, 2025, we received a written notification from the NYSE that as of May 2, 2025, we are not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE Listed Company Manual because the average closing price of our Class A common stock was less than $1.00 per share over a consecutive 30 trading-day period. Pursuant to Section 802.01C, we can regain compliance with the minimum share price requirement if, on the last trading-day of any calendar month during the cure period, the company has (i) a closing share price of at least $1.00 and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. If we do not regain compliance within six months, the NYSE may commence suspension and delisting procedures with respect to our Class A common stock. We intend to notify NYSE that we intend to cure the continued listing standard deficiency and to return to compliance with Section 802.01C. We intend to monitor the closing price of the Class A common stock and to consider available alternatives, including, but not limited to, a reverse stock split, subject to stockholder approval, if necessary to cure the stock price non-compliance.

### Basis of Presentation

The condensed consolidated financial statements and accompanying notes included elsewhere in this Report are prepared in accordance with GAAP.

### Key Metrics

We regularly monitor a number of operating metrics in order to evaluate our operating performance, identify trends affecting our business, formulate business plans, measure our progress and make strategic decisions. Our key metrics are not based on any standardized industry methodology and are not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our key metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. The numbers that we use to calculate our key metrics are based on internal data. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring such information. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.

### Units Deployed and New Units Deployed

We define Units Deployed as the aggregate number of Hub Devices that have been installed (including customer self-installations) and have an active subscription as of a stated measurement date. We utilize the Units Deployed metric to assess the health of our business and measure the trajectory of our growth. We define New Units Deployed as the aggregate number of Hub Devices that were installed (including customer self-installations) and resulted in a new active subscription during a stated measurement period. Although our revenue is primarily driven by New Units Deployed and the number of Units Deployed, due to the expansion of our products and services that don't require a Hub Device, and Hub Device upgrades that do not result in net new active subscriptions, the correlation between New Units Deployed and revenue is not as strong as it was historically. Although the correlation has decreased, New Units Deployed is still an indicator of our ability to acquire new customers and expand our relationships with our current customers. As of March 31, 2025 and 2024, we had an aggregate of 827,611 and 749,401 Units Deployed, respectively. For the three months ended March 31, 2025 and 2024, we had 18,114 and 29,710 New Units Deployed, respectively.

### Units Shipped

We define Units Shipped as the aggregate number of Hub Devices that have been shipped to customers during a stated measurement period. Units Shipped is used to assess the trajectory of our growth and is an indicator of our ability to acquire new customers and expand our relationships with our current customers. However, we caution that Units Shipped also includes Hub Devices for upgrades and out of warranty replacements and may not be an indicator of New Units Deployed in future periods. For the three months ended March 31, 2025 and 2024, we had 43,418 and 51,744 Units Shipped, respectively.

### Units Booked

We define Units Booked as the aggregate number of Hub Device units subject to binding orders executed during a stated measurement period that will result in a New Unit Deployed. We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only. For the three months ended March 31, 2025 and 2024 there were 18,210 and 46,290 Units Booked, respectively. For the three months ended March 31, 2025 and 2024, ARR (as defined below) related to Units Booked was $2,246 and $3,980, respectively.

### Bookings

We define Bookings as the contract value of hardware, professional services, and the first year of ARR for binding orders executed during a stated measurement period, including renewals and upgrades. We utilize Bookings to measure revenue expected to be earned in future periods from orders contracted during the current period. For the three months ended March 31, 2025 and 2024, Bookings were $27,180 and $38,761, respectively.

### SaaS Revenue

We define SaaS Revenue as monthly subscription revenue from fees paid by customers for access to one or more of SmartRent's software applications, including access controls, asset monitoring and related services, and our Community WiFi solution. We believe that SaaS Revenue growth demonstrates our ability to acquire new customers and to maintain and expand our relationships with existing customers. More specifically, we monitor our SaaS Revenue to assess the general health and trajectory of our Hosted Services business. Arrangements with customers do not provide the customer with the right to take possession of SmartRent's software at any time. Customers are granted continuous access to the services over the contractual period. As of March 31, 2025, approximately 35% of our ARR had prepaid payment terms. We believe that our customer base is inherently sticky given the barriers to entry associated with rolling out an integrated enterprise solution across a portfolio of rental units. For the three months ended March 31, 2025 and 2024, we generated SaaS Revenue of $14.0 million and $11.9 million, respectively.

### Annual Recurring Revenue

We define Annual Recurring Revenue ("ARR") as the annualized value of our SaaS Revenue earned in the current quarter, which we calculate by taking the total amount of SaaS Revenue in the current quarter and multiplying that amount by four. We believe that ARR growth demonstrates our ability to acquire new customers and to maintain and expand our relationships with existing customers. More specifically, we monitor our ARR to assess the general health and trajectory of our Hosted Services business. As of March 31, 2025 and 2024, ARR was approximately $55.9 million and $47.6 million, respectively.

### Hardware Average Revenue per Unit ("ARPU"), Professional Services ARPU, SaaS ARPU, and Units Booked SaaS ARPU

We define Hardware ARPU as total hardware revenue during a given period divided by the total Units Shipped during the same period. Hardware ARPU is used to evaluate the effectiveness of our hardware pricing and assess our ability to market and sell our hardware offerings. For the three months ended March 31, 2025 and 2024, Hardware ARPU was $434 and $562, respectively.

We define Professional Services ARPU as total professional services revenue during a given period divided by the total New Units Deployed, excluding customer self-installations, during the same period. Professional Services ARPU is used to assess our ability to effectively price our installation services. During the year ended December 31, 2024, we updated the denominator of the calculation to exclude self-installations as self-installations don't materially contribute to professional services revenue. For the three months ended March 31, 2025 and 2024, Professional Services ARPU was $427 and $223, respectively, per the new definition of Professional Services ARPU. Under the previous definition, Professional Services ARPU was $215 and $221 for the three months ended March 31, 2025 and 2024, respectively.

We define SaaS ARPU as total SaaS Revenue during a given period divided by the average aggregate Units Deployed in the same period divided by the number of months in the period. Average aggregate Units Deployed is calculated as the Units Deployed as of the current period plus the Units Deployed as of the previous period divided by two. SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions. For the three months ended March 31, 2025 and 2024, SaaS ARPU was $5.69 and $5.41, respectively.

We define Units Booked SaaS ARPU as the first year ARR for binding orders with Units Booked executed during the stated measurement period divided by the total Units Booked in the same period divided by the number of months in the period. Units Booked SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions for orders executed during the period. For the three months ended March 31, 2025 and 2024, Units Booked SaaS ARPU was $10.28 and $7.16, respectively.

### Customer Churn

We define Customer Churn as cancelled deployed units during the measurement period divided by Units Deployed as of the beginning of the measurement period. Cancelled deployed units are the previously deployed units that have been cancelled during the same measurement period in which a customer cancels all product subscriptions. Our Hosted Services growth is driven by our ability to retain our customers and minimize Customer Churn. Our Customer Churn for our Smart Communities Solutions was 0.02% for the three months ended March 31, 2025 and March 31, 2024.

### Property Net Revenue Retention

We define Property Net Revenue Retention as SaaS Revenue at the end of the current period related to properties which had SaaS Revenue at the end of the same period in the prior year, divided by SaaS Revenue at the end of the same period in the prior year for those same properties. Property Net Revenue Retention includes additions to revenue from price increases on existing products, additions of new products at existing properties and transfers of ownership, offset by any reductions in revenue caused by cancellations or downgrades. Property Net Revenue Retention was 102% as of March 31, 2025 compared to 105% as of March 31, 2024.

### Customer Net Revenue Retention

We define Customer Net Revenue Retention as SaaS Revenue at the end of the current period related to customers which had SaaS Revenue at the end of the same period in the prior year, divided by SaaS Revenue at the end of the same period in the prior year for those same customers. A customer with SaaS Revenue is defined as an entity that has an active subscription during the stated period. Customer Net Revenue Retention includes additions to revenue from transfers of ownership, price increases on existing products and additions of new products at existing properties, offset by any reductions in revenue caused by cancellations or downgrades. Customer Net Revenue Retention was 114% as of March 31, 2025.

The table below summarizes our key metrics.

| Hardware | Three months ended March 31, 2025 | 2024 | Change % |
| --- | ---: | ---: | ---: |
| Hardware Units Shipped | 43,418 | 51,744 | (16)% |
| Hardware ARPU | $434 | $562 | (23)% |
| **Professional Services** |  |  |  |
| New Units Deployed | 18,114 | 29,710 | (39)% |
| Professional services ARPU | $427 | $223 | 92% |
| **Hosted Services** |  |  |  |
| Units Deployed | 827,611 | 749,401 | 10% |
| Average aggregate units deployed | 818,554 | 734,546 | 11% |
| SaaS ARPU | $5.69 | $5.41 | 5% |
| **Bookings** |  |  |  |
| Units Booked | 18,210 | 46,290 | (61)% |
| Bookings (in thousands) | $27,180 | $38,761 | (30)% |
| Units Booked SaaS ARPU | $10.28 | $7.16 | 44% |

36

### Components of Results of Operations

### Revenue

We generate revenue primarily from sales of systems that consist of hardware devices, professional installation services and Hosted Services enabling property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents. We record revenue as earned when control of these products and services is transferred to the customer in an amount that reflects the consideration we expect to collect for those products and services. The table below summarizes our revenue by solution.

*(dollars in thousands)*

| SmartRent Solutions Smart Communities Solutions | For the three months ended March 31, 2025 Hardware | Professional Services | Hosted Services(1) | Total 2025 | 2024 Hardware | Professional Services | Hosted Services(1) | Total 2024 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Smart Apartments | $17,697 | $2,993 | $14,415 | $35,105 | $27,429 | $2,713 | $14,072 | $44,214 |
| Access Control | 639 | 475 | 531 | 1,645 | 1,015 | 561 | 349 | 1,925 |
| Community WiFi | 3 | 219 | 193 | 415 | 137 | 16 | 180 | 333 |
| Other | 491 | 206 | 684 | 1,381 | 496 | 168 | 492 | 1,156 |
| Smart Operations Solutions | - | - | 2,798 | 2,798 | - | - | 2,861 | 2,861 |
| **Total Revenue** | **$18,830** | **$3,893** | **$18,621** | **$41,344** | **$29,077** | **$3,458** | **$17,954** | **$50,489** |

(1) For the three months ended March 31, 2025 and 2024, Hosted services revenue for our Smart Apartments solution included hub amortization revenue of $4,658 and $6,043, respectively.

#### Hardware Revenue

We generate revenue from the direct sale to our customers of hardware smart home devices, which devices generally consist of a Hub Device, door-locks, thermostats, sensors, and light switches. These hardware devices provide features that function independently without subscription to our software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer. Certain Hub Devices do not function independently without the subscription, and therefore, the revenue is recognized in Hosted Services revenue. We generally provide a one-year warranty period on hardware devices that are delivered and installed. We record the cost of the warranty as a component of cost of hardware revenue.

#### Professional Services Revenue

We generate professional services revenue from installing smart home hardware devices, which does not result in significant customization of the installed products and is generally performed over a period ranging from two to four weeks. Installations can be performed by our employees, can be contracted out to a third party with our employees managing the engagement, or can be performed by the customer. Professional services contracts are generally performed on a fixed-price basis and revenue is recognized over the period in which installations are completed.

#### Hosted Services Revenue

We generate hosted services revenue from (1) the direct sale to our customers of hosted services from monthly subscription fees collected from customers to provide access to one or more of our software applications including access controls, asset monitoring, WiFi, and related services (“Hosted Services”) and (2) the amortization of non-distinct Hub Devices. The subscription arrangements have contractual terms ranging from one month to ten years and include recurring fixed plan subscription fees. The weighted average length of our recurring revenue contracts is 4.3 years. Our arrangements do not provide the customer with the right to take possession of our software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer.

We sold certain Hub Devices, which only function with the subscription to our software applications and related hosting services. We consider those devices and hosting services subscription as a single performance obligation, and therefore we defer the recognition of revenue for those devices that are sold with application subscriptions. The estimated average in-service life of those devices is four years. When a Hub Device without independent functionality is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years. We do not expect to deploy any more non-distinct Hub Devices.

### Cost of Revenue

Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. We expect the cost of revenue to increase in absolute dollars in future periods. We record any change to cost of job performance and job conditions in the period during which the revision is identified.

#### Hardware

Cost of hardware revenue consists primarily of direct costs of products, Hub Devices, hardware devices and supplies purchased from third-party providers, shipping costs, warehouse facility (including depreciation and amortization of capitalized assets and right-of-use assets) and infrastructure costs, personnel-related costs associated with the procurement and distribution of our products and estimated warranty expenses together with the indirect cost of customer care and support. We expect an increase in cost of hardware revenue in absolute dollars in future periods.

In 2019, the U.S. administration imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain SmartRent products manufactured overseas to additional import duties. The amount of the import tariff has changed numerous times based on action by the U.S. administration. We continue to monitor changes in policy impacting global trade, including tariff regulation. For example, the U.S. administration recently announced additional tariffs on imports from Canada, Mexico and China. Such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future.

#### Professional Services

Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with installation of our products, and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents.

#### Hosted Services

Cost of Hosted Services revenue consists primarily of the amortization of the direct costs of certain Hub Devices consistent with the revenue recognition period noted above in “Hosted Services Revenue” and infrastructure costs associated with providing our software applications together with the indirect cost of customer care and support over the life of the service arrangement. In future periods, we expect the cost of Hosted Services revenue to increase in absolute dollars at a rate that is lower than the corresponding increase in Hosted Services revenue.

### Operating Expenses

#### Research and Development

Research and development expenses consist primarily of personnel-related costs directly associated with our research and development activities. Our research and development efforts are focused on enhancing and developing additional functionality for our existing products and on new product development. We account for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life, which generally ranges from three to five years depending on the type of application. Costs incurred and capitalized during the product development stage generally include the costs of software configuration, coding, and testing. Such costs primarily include payroll and payroll-related expenses for employees directly involved in the product development. We expense preliminary evaluation costs as they are incurred before technological feasibility is achieved, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades. We begin amortizing capitalized costs when a project is ready for its intended use, and we periodically reassess the estimated useful life of a project considering the effects of obsolescence, technology, competition and other economic factors which may result in a shorter remaining life. We believe our research and development costs will increase in absolute dollars as we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features.

#### Sales and Marketing Expenses

Our sales and marketing expenses consist of costs directly associated with our sales and marketing activities, which primarily include personnel-related costs, sales commissions, marketing programs, trade shows, and promotional materials. Our sales and marketing expenses may increase over time as we hire additional sales and marketing personnel, increase our lead generation activities, grow our operations, and continue to build brand awareness.

#### General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs associated with our general and administrative organization, professional fees for legal, accounting and other consulting services, office facility, insurance, information technology costs, legal settlements, and expenses incurred as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing requirements, additional insurance expense, investor relations activities and other administrative and professional services. We may also increase the size of our general and administrative staff in order to support the growth of our business but at a rate that is lower than the corresponding increase in total revenue.

#### Impairment Charge

Impairment charge consists of goodwill impairment. See Note 2 - Significant Accounting Policies for more information.

#### Other Income/Expenses

Other income/expenses consist primarily of interest income, net of interest expense, foreign currency transaction gains and losses, and other income related to the operations of foreign subsidiaries. Interest expense is recorded in connection with our various debt facilities. Foreign currency transaction gains and losses relate to the impact of transactions denominated in a foreign currency other than the U.S. dollar. If we continue to expand our international operations, our exposure to fluctuations in foreign currencies has increased, which we expect to continue.

### Provision for Income Taxes

The income tax expense on the Condensed Consolidated Statement of Operations and Comprehensive Loss is primarily related to the foreign and state taxes offset by a change in the valuation allowance. We established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of the federal and state deferred tax assets will be realized in future periods if it reports taxable income. We believe that we have established an adequate allowance for uncertain tax positions, although we can provide no assurance that the final outcome of these matters will not be materially different. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

### Results of Operations for the Three Months Ended March 31, 2025 and 2024

The results of operations presented below should be reviewed together with the condensed consolidated financial statements and notes included elsewhere in this Report. The following table summarizes our historical consolidated results of operations data for the periods presented. The period-to-period comparison of operating results is not necessarily indicative of results for future periods. All dollars are in thousands unless otherwise stated.

*(dollars in thousands)*

| Revenue | Three months ended March 31, 2025 | 2024 | 2025 vs 2024 Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Hardware | $18,830 | $29,077 | $(10,247) | (35)% |
| Professional services | 3,893 | 3,458 | 435 | 13% |
| Hosted services | 18,621 | 17,954 | 667 | 4% |
| Total revenue | 41,344 | 50,489 | (9,145) | (18)% |
| Cost of revenue |  |  |  |  |
| Hardware | 13,960 | 18,684 | (4,724) | (25)% |
| Professional services | 7,293 | 6,448 | 845 | 13% |
| Hosted services | 6,529 | 5,934 | 595 | 10% |
| Total cost of revenue | 27,782 | 31,066 | (3,284) | (11)% |
| Operating expense |  |  |  |  |
| Research and development | 8,258 | 8,362 | (104) | (1)% |
| Sales and marketing | 4,770 | 4,554 | 216 | 5% |
| General and administrative | 16,894 | 16,666 | 228 | 1% |
| Total operating expenses | 29,922 | 29,582 | 340 | 1% |
| Impairment charge | 24,929 | - | 24,929 | 100% |
| Loss from operations | (41,289) | (10,159) | (31,130) | (306)% |
| Other income (expense) |  |  |  |  |
| Interest income, net | 1,200 | 2,409 | (1,209) | (50)% |
| Other income, net | 13 | 103 | (90) | (87)% |
| Loss before income taxes | (40,076) | (7,647) | (32,429) | (424)% |
| Income tax expense | 108 | 45 | 63 | 140% |
| Net Loss | $(40,184) | $(7,692) | $(32,492) | (422)% |

### Comparison of the three months ended March 31, 2025 and 2024

### Revenue

*(dollars in thousands)*

| Revenue | Three months ended March 31, 2025 | 2024 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Hardware | $18,830 | $29,077 | $(10,247) | (35)% |
| Professional services | 3,893 | 3,458 | 435 | 13% |
| Hosted services | 18,621 | 17,954 | 667 | 4% |
| Total revenue | $41,344 | $50,489 | $(9,145) | (18)% |

40

Total revenue decreased by approximately $9.1 million, or 18%, to $41.3 million for the three months ended March 31, 2025, from $50.5 million for the three months ended March 31, 2024. The decrease was primarily driven by a $9.1 million decrease in revenue related to our Smart Apartments solution which resulted primarily from a decrease in New Units Deployed to 18,114 units for the three months ended March 31, 2025 from 29,710 units for the three months ended March 31, 2024 and a 16% decrease in Units Shipped to 43,418 for the three months ended March 31, 2025 from 51,744 for the three months ended March 31, 2024, partially offset by a 10% increase in the number of cumulative active subscriptions for our Hosted Services during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Overall decreases in New Units Deployed and Units Shipped are primarily attributable to our customers' decisions to defer capital expenditures, driven by broader macroeconomic conditions. In addition, changes in leadership and the structure of our sales organization have adversely impacted sales and overall volumes.

Hardware revenue decreased by $10.2 million, or 35%, to $18.8 million for the three months ended March 31, 2025, from $29.1 million for the three months ended March 31, 2024. This decrease in hardware revenue was driven by a decrease in revenue related to our Smart Apartments Solutions which resulted from a 16% decrease in Units Shipped to 43,418 for the three months ended March 31, 2025 from 51,744 for the three months ended March 31, 2024, and a Hardware ARPU decrease of 23% to $434 for the 2025 period from $562 for the 2024 period. The Hardware ARPU decrease was primarily attributable to a change in customer mix.

Professional services revenue increased by $0.4 million, or 13%, to $3.9 million for three months ended March 31, 2025, from $3.5 million for the three months ended March 31, 2024. The increase in professional services revenue was driven by $1.1 million related to the installation of upgraded Hub Devices, which are not counted as New Units Deployed. This was partially offset by a $0.8 million decrease in revenue related to our Smart Apartments solutions. New Units Deployed decreased by 39% to 18,114 units for the three months ended March 31, 2025 from 29,710 units for the three months ended March 31, 2024.

Hosted Services revenue increased by $0.6 million, or 4%, to $18.6 million for the three months ended March 31, 2025, from $18.0 million for the three months ended March 31, 2024. Of the $18.6 million revenue in 2025, $14.0 million is related to SaaS Revenue and $4.6 million is related to hub amortization. Revenue from SaaS increased by $2.1 million, or 17%, and revenue from hub amortization decreased by $1.4 million from the three months ended March 31, 2024 to the three months ended March 31, 2025. The increase of Hosted Services revenue resulted primarily from a 10% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 749,401 units at March 31, 2024 to 827,611 units at March 31, 2025 and an increase in SaaS ARPU of 5% to $5.69 for the three months ended March 31, 2025 from $5.41 for the three months ended March 31, 2024.

We don’t expect to deploy any more non-distinct Hub Devices, thus, the revenue contribution from hub amortization should continue to decrease in future periods until the non-distinct Hub Devices are fully amortized. The table below shows the expected revenue contribution from hub amortization.

*(dollars in thousands)*

| Revenue contribution from hub amortization | 2025 | 2026 | 2027 |
| --- | ---: | ---: | ---: |
| Q1(1) | $4,658 | $2,104 | $153 |
| Q2 | 4,382 | 1,455 | 51 |
| Q3 | 3,419 | 886 | 18 |
| Q4 | 2,702 | 407 | 7 |
| Total | $15,161 | $4,852 | $229 |

(1) Q1 2025 amount is actuals.

### Cost of Revenue

*(dollars in thousands)*

| Cost of revenue | Three months ended March 31, 2025 | 2024 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Hardware | $13,960 | $18,684 | $(4,724) | (25)% |
| Professional services | 7,293 | 6,448 | 845 | 13% |
| Hosted services | 6,529 | 5,934 | 595 | 10% |
| Total cost of revenue | $27,782 | $31,066 | $(3,284) | (11)% |

41

Total cost of revenue decreased by $3.3 million, or 11%, to $27.8 million for the three months ended March 31, 2025, from $31.1 million for the three months ended March 31, 2024. The decrease in cost of revenue resulted primarily from a 39% decrease in New Units Deployed and a 16% decrease in Units Shipped of our Smart Apartment solution hardware devices.

Hardware cost of revenue decreased by $4.7 million, or 25%, to $14.0 million for the three months ended March 31, 2025, from $18.7 million for the three months ended March 31, 2024. This decrease in hardware cost of revenue was primarily attributable to a 16% decrease in Units Shipped.

Professional services cost of revenue increased by $0.9 million, or 13%, to $7.3 million for the three months ended March 31, 2025, from $6.4 million for the three months ended March 31, 2024. The increase in professional services cost of revenue is primarily attributable to an increase of approximately $1.4 million in third-party direct labor costs primarily related to the installation of upgraded Hub Devices, partially offset by a decrease of $0.5 million in personnel-related costs and travel driven by a 39% decrease in New Units Deployed.

Hosted Services cost of revenue increased by approximately $0.6 million, or 10%, to $6.5 million for the three months ended March 31, 2025, from $5.9 million for the three months ended March 31, 2024. The increase resulted from a 10% increase in the aggregate number of Units Deployed and the resulting increase in the number of active subscriptions for our software service applications and an increase in personnel-related costs of $0.4 million, partially offset by a $0.4 million decrease in hub amortization.

### Operating Expenses

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $8,258 | $8,362 | $(104) | (1)% |
| Sales and marketing | 4,770 | 4,554 | 216 | 5% |
| General and administrative | 16,894 | 16,666 | 228 | 1% |

Research and development expenses decreased by $0.1 million, or 1%, to $8.3 million for the three months ended March 31, 2025, from $8.4 million for the three months ended March 31, 2024, primarily related to an decrease of $0.5 million in personnel-related expenses, partially offset by an increase of $0.2 million in stock compensation and an increase of $0.2 million third-party consultants.

Sales and marketing expenses increased by $0.2 million, or 5%, to $4.8 million for the three months ended March 31, 2025 from $4.6 million for the three months ended March 31, 2024, resulting primarily from an increase of $0.1 million in stock compensation and $0.1 million in advertising. We believe our sales and marketing expenses will increase in future periods as we continue to invest in building a scalable sales team, which began with hiring our new Chief Revenue Officer in September 2024.

General and administrative expenses increased by $0.2 million, or 1%, to $16.9 million for the three months ended March 31, 2025 from $16.7 million for the three months ended March 31, 2024. This was primarily driven by a $1.7 million increase related to legal matters, partially offset by a $0.8 million decrease in the provision for expected credit losses. and a $0.7 million decrease in stock compensation.

### Impairment Charge

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Impairment charge | $24,929 | $- | $24,929 | 100% |

During the three months ended March 31, 2025, we identified certain indicators of impairment, which resulted in a goodwill impairment charge of $24.9 million. See Note 2 - Significant Accounting Policies for additional information.

### Other Income

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income, net | $1,200 | $2,409 | $(1,209) | (50)% |
| Other income, net | 13 | 103 | (90) | (87)% |

42

Interest income, net decreased by approximately $1.3 million to $1.2 million for the three months ended March 31, 2025, from $2.4 million for the three months ended March 31, 2024. The decrease in net interest income is primarily attributable to a lower cash balance on which we’re earning interest, and a decrease in interest rates.

### Income Taxes

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Loss before income taxes | $(40,076) | $(7,647) | $(32,429) | (424)% |
| Income tax expense | 108 | 45 | 63 | 140% |

We provided a full valuation allowance on our net U.S. federal and state deferred tax assets at March 31, 2025 and 2024.

As of December 31, 2024, we had gross net operating losses of $222.9 million and $215.4 million for federal and state income tax return purposes, respectively. Federal net operating losses can be carried forward indefinitely, while State net operating losses will expire between 2032 and 2044. We also have $0.1 million of R&D credits available that expire in 2039.

The income tax expense is related to the foreign and state taxes offset by a change in the valuation allowance.

### Non-GAAP Financial Measures

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we present EBITDA and Adjusted EBITDA, described below, as non-GAAP measures. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team and improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends.

All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures - these non-GAAP financial measures are not intended to supersede or replace our GAAP results.

We define EBITDA as net income (loss) computed in accordance with GAAP before interest income, net, income tax expense (benefit) and depreciation and amortization.

We define Adjusted EBITDA as EBITDA before expenses related to non-recurring legal matters, stock-based compensation, goodwill impairment, non-recurring warranty provisions, other acquisition expenses, and other expenses caused by non-recurring, or unusual, events that are not indicative of our ongoing business.

Our management uses EBITDA and Adjusted EBITDA to assess our financial and operating performance, and we believe these measures are helpful to management and external users in understanding our performance. EBITDA and Adjusted EBITDA help management identify controllable cash expenses and make decisions designed to help us meet our identified financial and operational goals and to optimize our financial performance, while neutralizing the impact of some expenses included in our operating results caused by external influences over which management has little or no control and by non-recurring, or unusual, events that might otherwise mask trends in our performance. Accordingly, we believe these metrics measure our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.

We believe that the presentation of EBITDA and Adjusted EBITDA provides information useful to investors in assessing our results of operations. The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income (loss). EBITDA and Adjusted EBITDA are not used as measures of our liquidity and should not be considered alternatives to net income (loss) or any other measure of financial performance presented in accordance with GAAP. Our EBITDA and Adjusted EBITDA may not be comparable to the EBITDA and Adjusted EBITDA of other companies due to the fact that not all companies use the same definitions of EBITDA and Adjusted EBITDA. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.

The following table presents a reconciliation of net loss (as determined in accordance with GAAP) to EBITDA and Adjusted EBITDA for each of the periods indicated.

*(dollars in thousands)*

|  | For the three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| **Net loss** | $(40,184) | $(7,692) |
| Interest income, net | (1,200) | (2,409) |
| Income tax expense | 108 | 45 |
| Depreciation and amortization | 1,943 | 1,501 |
| **EBITDA** | (39,333) | (8,555) |
| Legal matters(1) | 5,105 | 5,300 |
| Stock-based compensation | 2,836 | 3,281 |
| Goodwill impairment(2) | 24,929 | - |
| Non-recurring warranty provision | (150) | - |
| Other acquisition expenses | 52 | 140 |
| Other non-operating expenses(3) | 189 | 231 |
| **Adjusted EBITDA** | $(6,372) | $397 |

(1) Refer to Note 12 "Commitments and Contingencies".

(2) Refer to Note 2 "Significant Accounting Policies"

(3) During the three months ended March 31, 2025 and 2024, other non-operating expenses includes severance expense of $169 and $231, respectively.

### Liquidity and Capital Resources

### Sources of Liquidity

As of March 31, 2025, we had cash and cash equivalents of $125.6 million, which were held for working capital and general corporate purposes. Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds received as a result of the Business Combination, and payments collected from sales to our customers.

#### Debt Issuances

Following the maturity of our Revolving Facility (as defined below) in December 2021, we entered into a $75.0 million senior secured revolving credit facility with a five-year term (the "Senior Revolving Facility"). Interest rates for draws upon the Senior Revolving Facility are determined by whether we elect a secured overnight financing rate loan (“SOFR Loan”) or alternate base rate loan (”ABR Loan”). For SOFR Loans, the interest rate is based upon the forward-looking term rate based on SOFR as published by the CME Group Benchmark Administration Limited (CBA) plus 0.10%, subject to a floor of 0.00%, plus an applicable margin. For ABR Loans, the interest rate is based upon the highest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50%, or (iii) 3.25%, plus an applicable margin. As of March 31, 2025, the applicable margins for SOFR Loans and ABR Loans under the Senior Revolving Facility were 1.75% and (0.50%), respectively. The Senior Revolving Facility is secured by substantially all of our assets and guaranteed by each of our material domestic subsidiaries.

We believe that our current cash, cash equivalents, available borrowing capacity under the Senior Revolving Facility, and cash raised in the Business Combination will be sufficient to fund our operations for at least the next 12 months beyond the issuance date of this Report. Our future capital requirements, however, will depend on many factors, including our sales volume, the expansion of sales and marketing activities, and market adoption of our new and enhanced products and features. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through equity and debt financings. If we are unable to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition may be adversely affected.

### Stock Repurchase Program

In March 2024, the Board authorized a stock repurchase program pursuant to which we may repurchase up to $50 million of our Class A common stock. Repurchases under the program may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. The repurchase program does not obligate us to acquire any particular amount of our Class A common stock and may be suspended at any time at our discretion. The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

During the three months ended March 31, 2025, we repurchased 1.0 million shares of our Class A common stock under the stock repurchase program at an average price of approximately $1.18 per share for a total of $1.2 million. As of March 31, 2025, approximately $20.4 million remained available for stock repurchases pursuant to our stock repurchase program.

During the three months ended March 31, 2024, we repurchased 1.6 million shares of our Class A common stock under the stock repurchase program at an average price of approximately $2.74 per share for a total of $4.4 million. As of March 31, 2024, approximately $45.6 million remained available for stock repurchases pursuant to our stock repurchase program.

### Cash Flow Summary - Three Months Ended March 31, 2025 and 2024

The following table summarizes our cash flows for the periods presented.

*(dollars in thousands)*

| Net cash used in | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Operating activities | $(12,169) | $(3,337) |
| Investing activities | (3,469) | (956) |
| Financing activities | (1,505) | (6,462) |

### Operating Activities

For the three months ended March 31, 2025, our operating activities used $12.2 million in cash resulting primarily from our net loss of $40.2 million and $2.6 million used in changes in our operating assets and liabilities, partially offset by approximately $30.6 million provided by non-cash expenses. Changes in our operating assets and liabilities primarily resulted from a $16.1 million decrease in deferred revenue and a $2.6 million decrease in accrued expenses and other liabilities, partially offset by a $9.4 million decrease in accounts receivable, a $2.8 million decrease in deferred cost of revenue, a $2.5 million increase in accounts payable and a $1.9 decrease in inventory. Non-cash expenses consisted primarily of a $24.9 million goodwill impairment - refer to Note 2 Significant Accounting Policies, $2.8 million of stock compensation and $1.9 million of depreciation and amortization.

For the three months ended March 31, 2024, our operating activities used $3.3 million in cash resulting primarily from our net loss of $7.7 million and $6.7 million used in changes in our operating assets and liabilities, partially offset by $11.1 million provided by non-cash expenses. Changes in our operating assets and liabilities primarily resulted from a $7.4 million decrease in accounts payable, $6.7 million decrease in accrued expenses and other liabilities, and a $3.6 million decrease in deferred revenue, partially offset by a $5.6 million decrease in inventory, $2.7 million decrease in accounts receivable, and a $2.7 million decrease in deferred cost of revenue. Non-cash expenses consisted primarily of a non-cash legal accrual for $5.0 million in which the Company has made a substantive offer to settle a dispute with a supplier by returning $5.0 million of inventory, stock-based compensation of $3.3 million, depreciation and amortization of $1.5 million, and provision for doubtful accounts of $1.2 million.

### Investing Activities

For the three months ended March 31, 2025, we used $3.5 million of cash for investing activities, resulting primarily from cash paid of $2.2 million for the purchase of property and equipment (primarily tenant improvements for which reimbursement is expected to be received during the quarter ended June 30, 2025) and $1.3 million for capitalized internal-use software development costs,

For the three months ended March 31, 2024, we used $1.0 million of cash for investing activities, resulting primarily from cash paid of $0.9 million for capitalized internal-use software development costs.

### Financing Activities

For the three months ended March 31, 2025, our financing activities used $1.5 million of cash, resulting primarily from $1.2 million used for repurchases of Class A common stock, and $0.5 million used for taxes paid related to net share settlements of stock-based compensation awards.

For the three months ended March 31, 2024, our financing activities used $6.5 million of cash, resulting primarily from $4.4 million used for repurchases of Class A common stock, $1.5 million used for earnout payments related to the iQuue acquisition, and $0.9 million used for taxes paid related to net share settlements of stock-based compensation awards.

### Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2025.

### Critical Accounting Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.

### Revenue Recognition

We derive revenue primarily from sales of systems that consist of hardware devices, professional installation services and Hosted Services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recognized when control of these products and services are transferred to the customer in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products and services.

Payments we receive by check or automated clearing house payments, and payment terms are determined by individual contracts and range from due upon receipt to net 30 days. Taxes collected from customers and remitted to governmental authorities are not included in reported revenue. Payments received from customers in advance of revenue recognition are reported as deferred revenue.

We apply the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. We only apply these steps when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services it transfers to a customer.

Accounting for contracts recognized over time involves the use of various estimates of total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation may be revised in the future as we observe the economic performance of our contracts. Changes in job performance, job conditions and estimated profitability may result in revision to our estimates of revenue and costs and are recognized in the period in which the revision is identified.

We may enter into contracts that contain multiple distinct performance obligations including hardware and Hosted Services. The hardware performance obligation includes the delivery of hardware, and the Hosted Services performance obligation allows the customer use of our software during the contracted-use term. The subscription for the software and certain Hub Devices combine as one performance obligation, and there is no support or ongoing subscription for other device hardware. We partner with several manufacturers to offer a range of compatible hardware options for its customers. We maintain control of the hardware purchased from manufacturers prior to it being transferred to the customer, and accordingly, SmartRent is considered the principal in these arrangements.

For each performance obligation identified, we estimate the standalone selling price, which represents the price at which we would sell the good or service separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, considering available information such as market conditions, historical pricing data, and internal pricing guidelines related to the performance obligations. We then allocate the transaction price among those obligations based on the estimation of the standalone selling price.

### Goodwill

Goodwill represents the excess of cost over net assets of our completed business combinations. We test for potential impairment of goodwill on an annual basis as of September 30 to determine if the carrying value is less than the fair value. We will conduct additional tests between annual tests if there are indications of potential goodwill impairment. During the three months ended March 31, 2025, we experienced a sustained decline in stock price, resulting in a significant decrease in market capitalization. As a result, we conducted an interim impairment test utilizing the qualitative approach and determined that impairment is more likely than not. As a result, we then performed an interim quantitative impairment test which resulted in an indication of impairment.

The fair value of the reporting unit used in this impairment test was determined using a combination of an income approach and market-based approach. The mix between the two approaches requires significant judgement. As a result of these tests, we recorded a goodwill impairment charge of $24,929.

The significant assumptions used in determining the fair value of the reporting unit under the income approach primarily relate to revenue growth rate, forecasted EBITDA and the selected discount rate used in the discounted cash flow model. The significant assumptions used in the market-based approach primarily relate to the forecasted EBITDA margin, the selected control premium, and selected revenue and EBITDA multiples, which require significant judgement.

To the extent that inputs and assumptions used in the analysis change, such as an increased discount rate, updated cash flow projections, or decreases to Guideline companies’ multiples, additional impairment charges may be recorded in the future. In addition, a further decrease in our common stock share price and market capitalization could be an indicator of a decrease in the fair value of our equity.

As noted above, the estimates and assumptions regarding expected future cash flows, discount rates, and revenue and EBITDA multiples require considerable judgment and are based on market conditions, financial forecasts, industry trends, and historical experience. These estimates have inherent uncertainties, and different assumptions could lead to materially different results. Our goodwill balance was $92.3 million and $117.3 million as of March 31, 2025 and December 31, 2024, respectively.

### Inventory Valuation

Inventories are stated at the lower of cost or estimated net realizable value. Cost is computed under the first-in, first-out method. We adjust the inventory balance based on anticipated obsolescence, usage, and historical write-offs. Significant judgment is used in establishing our forecasts of future demand and obsolete material exposures. We consider marketability and product life cycle stage, product development plans, demand forecasts, historical revenue, and assumptions about future demand and market conditions in establishing our estimates. If the actual product demand is significantly lower than forecast, which may be caused by factors within and outside of our control, or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and our customer requirements, we may be required to increase our inventory adjustment. A change in our estimates could have a significant impact on the value of our inventory and our results of operations.

### Stock-Based Compensation

Our stock-based compensation relates to stock options and restricted stock units ("RSUs") granted to our employees and directors. Stock-based awards are measured based on the grant date fair value. We estimate the fair value of stock option awards on the grant date using the Black-Scholes option-pricing model. The fair value of RSUs is based on the grant date fair value of the stock price. The fair value of these awards is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest. Forfeitures are recognized as they occur by reversing previously recognized compensation expense.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield, the expected stock price volatility over the expected term and forfeitures, which are recognized as they occur. For all stock options granted, we calculated the expected term using the simplified method for “plain vanilla” stock option awards.

The grant date fair value is also utilized with respect to RSUs with performance and service conditions to vest. For RSUs with a performance condition, based on a liquidity event, as well as a service condition to vest, no compensation expense is recognized until the performance condition has been satisfied. Subsequent to the liquidity event, compensation expense is recognized to the extent the requisite service period has been completed and compensation expense thereafter is recognized on an accelerated attribution method. Under the accelerated attribution method, compensation expense is recognized over the remaining requisite service period for each service condition tranche as though each tranche is, in substance, a separate award. In August 2021, we completed the merger with FWAA, which met the liquidity event vesting condition and triggered the recognition of compensation expense for awards of RSUs, or applicable portions of such awards, for which the time-based vesting condition had been satisfied.

### Emerging Growth Company Status

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") exempts “emerging growth companies” as defined in Section 2(A) of the Securities Act of 1933, as amended, from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” and have elected to take advantage of the benefits of this extended transition period.

We will use this extended transition period for complying with new or revised accounting standards that have different effective dates for public business entities and non-public business entities until the earlier of the date we (a) are no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. The extended transition period exemptions afforded by our emerging growth company status may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of this exemption because of the potential differences in accounting standards used.

We will remain an “emerging growth company” under the JOBS Act until the earliest of (a) the first fiscal year following the fifth anniversary of the initial public offering by FWAA, which closed on February 9, 2021, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the last date of our fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non- convertible debt securities during the previous three years.

### Recent Accounting Pronouncements

See Note 2, “Significant Accounting Policies” - Recent Accounting Guidance for more information.

## Market risk

As filed, 2,228 characters.

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.

We do not believe that inflation has had a material effect, to date, on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.

### Interest Rate Fluctuation Risk

As of March 31, 2025, we had cash, cash equivalents, and restricted cash of approximately $125.6 million, which consisted primarily of institutional money market funds, which carries a degree of interest rate risk. A hypothetical 10% change in interest rates would increase our annual interest income by $12.6 million, or decrease our annual interest income by $4.8 million, based on our cash position as of March 31, 2025.

### Foreign Currency Exchange Rate Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States and to a lesser extent in Croatia and other international markets. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.

## Controls and procedures

As filed, 1,308 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at the end of the period covered by this Report and, based on such evaluation, have concluded that our disclosure controls and procedures were effective as of March 31, 2025, at the reasonable assurance level to ensure that the information required to be disclosed by us in this Report was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Interim Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,998 characters.

We are subject to various risks and uncertainties in the course of our business. For a discussion of risks and uncertainties relating to our business, please see the section titled "Risk Factors" in our Annual Report on 10-K filed with the SEC on March 5, 2025. Other than the risk factors below, there have been no material changes from the risk factors disclosed therein. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.

***We may not successfully manage the transition of leadership associated with the departure of our Chief Executive Officer, which could have an adverse impact on us.***

On April 10, 2025, we announced the departure of Michael Shane Paladin as the Company’s Chief Executive Officer and as a member of our board of directors. In connection with Mr. Paladin's departure, John Dorman, our Board Chair, was appointed as our Interim Chief Executive Officer, and Alison Dean, a current member of our board of directors, was appointed as lead independent director of the Board. Our success will depend, in part, on our management of the transition to our Interim Chief Executive Officer, the effectiveness of our Interim Chief Executive Officer, our search for, transition to and integration of a permanent successor Chief Executive Officer, and the effectiveness of the permanent successor, if appointed. There can be no assurance that we will be successful in finding a suitable permanent successor or that we will be able to do so in a timely manner. The Chief Executive Officer position is critical to executing on and achieving our vision, strategic direction, culture, and products. The leadership transition may create uncertainty among employees, suppliers and customers, divert resources and management attention, and impact public or market perception, our stock price or our performance, any of which could negatively impact our ability to operate effectively which could have an adverse impact on our business and results of operations.

***We are not in compliance with the NYSE’s minimum share price requirement, and, as a result, shares of our common stock may be delisted from the NYSE, which would have an adverse impact on the trading volume, liquidity and market price of shares of our Class A Common Stock.***

On May 2, 2025, we received a written notification from the NYSE that as of May 2, 2025, we are not in compliance with the continued listing standard set forth in Section 802.01C of the NYSE Listed Company Manual because the average closing price of our Class A common stock was less than $1.00 per share over a consecutive 30 trading-day period. Pursuant to Section 802.01C, we can regain compliance with the minimum share price requirement if, on the last trading-day of any calendar month during the cure period, the company has (i) a closing share price of at least $1.00 and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. If we do not regain compliance within six months, the NYSE may commence suspension and delisting procedures with respect to our Class A common stock. We intend to notify NYSE that we intend to cure the continued listing standard deficiency and to return to compliance with Section 802.01C. We intend to monitor the closing price of the Class A common stock and to consider available alternatives, including, but not limited to, a reverse stock split, subject to stockholder approval, if necessary to cure the stock price non-compliance.

While we expect to regain compliance with the NYSE’s listing requirements, there can be no assurance that we will do so. If the NYSE delists our securities from trading on its exchange and we are not able to list such securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, it could adversely affect our business, financial condition, and results of operations and would likely result in decreased liquidity and greater volatility, which may materially and adversely affect the value of our Class A common stock. A delisting of our Class A common stock could negatively impact our company and holders of our Class A common stock, including by reducing the willingness of investors to hold our Class A common stock because of the resulting decreased price, liquidity and trading of our Class A common stock, limited availability of price quotations, and reduced news and analyst coverage. These developments may also require brokers trading in our Class A common stock to adhere to more stringent rules and may limit our ability to raise capital by issuing additional shares of Class A common stock in the future. Delisting may adversely impact the perception of our financial condition, cause reputational harm with investors, our employees and parties conducting business with us, and limit our access to debt and equity financing.

Filed May 7, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-065034. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.